Government Secures Victory as Court Upholds Affordable Housing Levy

The High Court of Kenya upheld the constitutionality of the controversial 1.5% Affordable Housing levy, delivering a win for the government’s ambitious plan to address the country’s housing deficit. A three-judge bench, comprising Justices Olga Sewe, John Chigiti, and Josephine Mong’are, dismissed a petition challenging the levy, finding that it aligned with constitutional provisions and public participation processes. The decision marks a pivotal moment in the ongoing debate over the government’s Affordable Housing Act, 2024, which mandates a 1.5% deduction from employees’ gross income, matched by an equal contribution from employers.

The petition was filed by prominent figures including Busia Senator Okiya Omtatah, activist Eliud Matindi, and the Katiba Institute, all of whom argued that the levy amounted to double taxation, discrimination, and overreach by the national government. However, the court rejected these claims, ruling that the levy is not only constitutional but also essential for addressing Kenya’s critical housing shortage.

Public Participation and Constitutional Alignment

One of the central arguments in the case was the alleged lack of public participation in the enactment of the Affordable Housing Act, 2024. The petitioners contended that the public had not been adequately consulted, thus violating Article 10 of the Kenyan Constitution, which guarantees public participation in governance. They also argued that the levy was discriminatory, placing an unfair burden on salaried workers.

However, the court disagreed. In its ruling, the three-judge bench emphasized that there had been sufficient efforts to engage the public before the enactment of the law. The judges noted that the petitioners failed to prove that the public participation process had been insufficient or that their views had been ignored.

“The bench is satisfied that there was adequate public participation ahead of the enactment of the Affordable Housing Act, 2024. The bench rules that there was adequate effort to get and consider the public’s views on the bill,” the judgment read in part.

This ruling is significant because it reaffirms the role of public participation in legislative processes while also asserting that the quality and scope of participation can vary as long as reasonable efforts are made to consult the public. The court found that in this case, the government had made adequate efforts to involve the public and incorporate feedback.

No Double Taxation or Discrimination

Another key issue in the petition was the claim that the levy amounted to double taxation. The petitioners argued that workers already pay income tax, and the additional 1.5% levy imposed by the Affordable Housing Act was effectively a second tax on their income. They also contended that the levy was discriminatory, as it targeted salaried workers while excluding other income groups.

The court rejected both of these claims. The judges found that the Affordable Housing levy was distinct from income tax and served a specific purpose, namely funding the construction of affordable housing units for Kenyans. They noted that the power to design and administer taxes, including levies such as this one, rests with Parliament. The court ruled that the housing levy does not constitute double taxation since it is intended to achieve a particular social and economic goal.

“The Housing Levy, as provided for in the Affordable Housing Act 2024, is properly in place and in accordance with the Constitution,” the judges said.

On the issue of discrimination, the court found that the levy applied equally to all salaried workers and was not discriminatory. The judges pointed out that the law includes provisions for non-salaried workers to contribute to the housing fund, countering the argument that it unfairly targeted a specific group. This part of the ruling is particularly significant as it addresses concerns that the levy would disproportionately burden lower-income salaried workers.

“The Affordable Housing Levy, as provided for in the Affordable Housing Act 2024, IS NOT discriminatory as alleged by the petitioners. The Act provides for deduction of the same from non-payslip Kenyans,” the judges stated.

A Crucial Component of the Government’s Strategy

The court’s decision also emphasized the importance of the housing levy as a key component of the government’s broader strategy to address Kenya’s housing crisis. With an estimated housing deficit of over two million units, the Affordable Housing Program is a flagship initiative of President William Ruto’s administration. The government aims to provide affordable housing to millions of Kenyans, particularly in urban areas where housing shortages are most acute.

The judges underscored that the levy was an integral part of the government’s plan to fund the construction of new housing units. They noted that addressing the housing deficit is a matter of national importance, and the levy was designed to create a sustainable financial mechanism to support the program.

“The Affordable Housing Levy is a crucial component of the government’s strategy to tackle the country’s housing deficit,” the court stated in its ruling.

By upholding the levy, the court has cleared a major legal hurdle for the government’s housing program, allowing it to proceed with the collection of funds necessary to meet its ambitious targets. This decision is likely to bolster the administration’s efforts to deliver on its campaign promises to provide affordable housing to the country’s urban and low-income populations.

Devolution and the Role of County Governments

The petitioners also raised concerns about the Affordable Housing Act’s potential encroachment on areas reserved for county governments, particularly housing and urban development. They argued that housing is a devolved function under the Constitution, and the national government’s involvement in the sector could undermine devolution.

The court, however, found that the Affordable Housing Act does not infringe on county governments’ constitutional roles. The judges ruled that while housing is indeed a devolved function, the national government has the mandate to create national policies and laws that address critical issues like the housing deficit. They emphasized that the Affordable Housing Act complements, rather than competes with, county-level initiatives.

“The Act does not undermine devolution,” the judges asserted, pointing out that counties would still have a role to play in implementing the housing program within their jurisdictions.

Next Steps: An Appeal on the Horizon?

Despite the court’s clear ruling in favor of the government, the petitioners have vowed to appeal the decision. Senator Okiya Omtatah, a well-known public interest litigator, has stated that he and his co-petitioners will challenge the High Court’s decision at the Court of Appeal. They maintain that the housing levy is unconstitutional and that their concerns about double taxation, discrimination, and public participation have not been adequately addressed.

“We respect the court’s decision but strongly disagree with its findings. We will be appealing this ruling because we believe that the Affordable Housing levy is unconstitutional and places an unfair burden on hardworking Kenyans,” Omtatah said in a statement after the ruling.

The appeal will likely prolong the legal battle over the levy, keeping the issue in the public eye as the government pushes forward with its housing program. The outcome of the appeal could have far-reaching implications for both the government’s policy agenda and the broader debate over taxation, social justice, and public participation in Kenya.

Conclusion

The High Court’s ruling upholding the Affordable Housing levy represents a significant victory for the Kenyan government and its housing agenda. The court’s decision reaffirms the constitutionality of the levy, dismissing concerns about double taxation, discrimination, and devolution. While the petitioners have pledged to appeal, the ruling provides the government with a crucial legal endorsement as it moves forward with its plans to address Kenya’s housing shortage.

This case highlights the complex interplay between taxation, public participation, and governance in Kenya, with significant implications for how the government funds and implements its development programs. As the legal battle continues, the ruling stands as a reminder of the challenges and opportunities that come with ambitious policy initiatives in a dynamic constitutional framework.